It is not often one gets to use the phrases “standing ovation” and “insurance conference” in the same sentence. My latest opportunity to do so followed a hard-hitting, energetic and inspirational presentation by Joe Plumeri, the Chairman and Chief Executi
With his final “God bless you, everybody” resonating through the auditorium, the audience rose in unison to applaud Plumeri for his upbeat and insightful message. His positive sentiment was encapsulated in one of his opening comments, where he observed: “I have run almost every kind of financial services institution – and I can tell you that what the insurance sector does, collectively, has a more profound effect on society than any other [sector].” He reminded us that insurance “repairs and rebuilds communities” as evidenced post-Hurricane Katrina (when insurers chipped in $34 billion of the $50 billion clean-up bill) and in the wake of the World Trade Centre disaster (where insurers paid out around $4.4 billion).
Getting to grips with the value of insurance
Any doubt as to the value of insurance will have been dispelled by the $105 billion in insured losses suffered due to natural catastrophes through 2011. Unfortunately insurance consumers, both personal lines and corporate, remain fixated on price. Plumeri noted that while insurance brokers (and insurers) perform a function of greater value than many other professions, they are too ashamed to talk about money. “A lawyer will not even give you a cup of coffee before he tells you how much his consultation will cost,” said Plumeri. “If you say the asking price is too steep he will show you the door.”
If you want to feel good about what you do, then you must encourage greater transparency around price. The bottom line: “Price is an issue in the absence of value!” The one thing conference attendees should take home from The Insurance Conference 2012 is Plumeri’s: “Price is only an issue in the absence of value!” By extension the onslaught of regulation over the past decade is a consequence of “the absence of value”. New regulation in both the prudential and market conduct environments is a result of poor, immoral and even unethical business practice. “We should not need regulators to tell us what we need to do to do the right thing – we should take that on ourselves,” he said.
The regulatory landscape has changed radically over the past decade. To remain relevant insurance brokers must challenge the fundamentals of the industry. “Writing insurance business is no longer a case of simply placing insurance because ‘that’s what we always did’,” said Plumeri. “My thesis is that the insurance industry must transform from a transaction oriented business to one that sustains itself and encourages its clients to think about insurance more broadly than simply buying cover.”
“Insurance is the DNA of capitalism!”
There’s no better way to get a crowd of insurance professionals behind you than to tell them that their industry is the DNA of capitalism. “Without insurance nothing flies, nobody works, nothing gets built, nobody moves, nothing moves,” he enthused. “It is the only industry in the world where I can say: ‘Look out the window – do you see what’s moving – it is moving because of the insurance industry!”
21st Century insurance is about surviving the perfect storm. Today’s insurers (and insurance brokers) have to balance the regulatory demands on capital and solvency with profit, trade through continued macroeconomic uncertainty, and produce acceptable investment returns despite low interest rates and a “soft” global economic outlook. Plumeri added to the conference “Top 10” lists of insurance risks with one of his own. His top three risks included pandemics, terrorism and climate change, issues debated frequently by the industry at present. Think back to the World Trade Centre attack, Avian and Swine flu scares and of course the $105 billion in insured natural catastrophe damages in the past year…
His risks acknowledge shifts in modern insurance trends… A decade ago nobody would have thought that piracy, cyber-security and globalisation would make it onto a list of insurance industry risks… Other threats include reputation (a strong theme emerging from the conference), the cost and availability of credit, regulation and compliance, and market capitalisation risk. The good news is there are abundant opportunities, particularly in the new emerging economies.
The future of insurance
“The golden era of insurance has not begun yet,” said Plumeri. He pointed to the global emerging middle class that should swell by two billion individuals by 2050… Africa will drive this trend thanks to 1.1 billion middle class across the continent by 2060! An insurance broker intent on success must ask the right question. Ask yourself: “How can I sustain my client’s ability to stay in business for five or 10 years time?” And ask the client: “What resilient or sustainability model do you have in place to ensure, that in a world full of danger, you will still be in business five or 10 years from now?”
The Willis Group is a leading global insurance broker that delivers insurance, reinsurance, risk management, financial and human resource consulting, and actuarial services to corporations, public entities and institutions around the world. The company can trace its history to 1828 making it the oldest surviving insurance broker in the world! (For more information, visit http://www.willis.com/).
Editor’s thoughts: A lot has been written about the negative consequences of the direct insurers’ attacks on the value of financial advice. Their negative stance has caused untold damage to the industry… Unfortunately short-term insurance brokers who buy into the “price before value” concept risk damaging the industry too. Do stakeholders in the domestic insurance industry do enough to emphasize the value in the product they develop and distribute? Add your comment below, or send it to gareth@fanews.co.za
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Added by Balanced view, 13 Jun 2012